Bukele's Mining Pledge Rewrites El Salvador's Volcano Bond Math

El Salvador's volcano bond plan has taken a significant turn following President Bukele's pledge of $1.5 billion in revenue from volcano-powered mining. This new development changes the math for the original $1 billion Volcano Bonds, which were designed to raise funds for energy infrastructure supporting Bitcoin City.

The city, located at the base of the Conchagua volcano, aims to be a tax-free zone with zero taxes on income or property, although residents would still pay value-added tax. Half of the VAT revenue would go toward building the city, while the rest maintains the streets.

Investors in the Volcano Bonds receive a 6.5 percent annual coupon and a share of Bitcoin appreciation, but only up to a 4.5 percent compound annual return. Any further gains beyond this threshold would see the government take 50 percent.